Rural hospital leaders are questioning whether they can continue to afford to do business with Medicare Advantage companies, and some say the only way to maintain services and protect patients is to end their contracts with the private insurers
Medicare Advantage plans pay hospitals lower rates than traditional Medicare, said Jason Merkley, CEO of Brookings Health System in South Dakota. Merkley worried the losses would spark staff layoffs and cuts to patient services. So last year, Brookings Health dropped all four contracts it had with major Medicare Advantage companies.
“I’ve had lots of discussions with CEOs and executive teams across the country in regard to that,” said Merkley, whose health system operates a hospital and clinics in the small city of Brookings and surrounding rural areas.
Merkley and other rural hospital operators in recent years have enumerated a long list of concerns about the publicly funded, privately run health plans. In addition to the reimbursement issue, their complaints include payment delays and a resistance to authorizing patient care.
But rural hospitals abandoning their Medicare Advantage contracts can leave local patients without nearby in-network providers or force them to scramble to switch coverage.
Medicare is the main federal health insurance program for people 65 or older. Participants can enroll in traditional, government-run Medicare or in a Medicare Advantage plan run by a private insurance company.
In 2024, 56% of urban Medicare recipients were enrolled in a private plan, according to a report by the Medicare Payment Advisory Commission, a federal agency that advises Congress. While just 47% of rural recipients enrolled in a private plan, Medicare Advantage has expanded more quickly in rural areas.
In recent years, average Medicare Advantage reimbursements to rural hospitals were about 90% of what traditional Medicare paid, according to a new report from the American Hospital Association. And traditional Medicare already pays hospitals much less than private plans, according to a recent study by Rand Corp., a research nonprofit.